Rev. Proc. 81-5

Section 1. Background

Rev. Proc. 80-22, 1980-1 C.B. 654, provides a list of those areas of the Internal Revenue Code under the jurisdiction of the Assistant Commissioner (Technical) in which the Internal Revenue Service will not issue advance ruling or determination letters. A list of these areas is set forth in section 3.01 of the revenue procedure.

Sec. 2. Procedure

Rev. Proc. 80-22 is amplified to include the following under section 3.01:

Section 351--Transfers to Controlled Corporation.--

(a) That this section applies to a transfer by a shareholder of stock in one corporation (acquired) to another corporation (acquiring), in an exchange otherwise qualifying for treatment under this section, if the exchange is part of a larger transaction that fits a pattern common to acquisitive reorganizations, and after the transaction the acquiring corporation has control of the acquired corporation (within the meaning of section 368(c)), unless there is a continuing interest through stock ownership in the acquiring corporation on the part of the former shareholders of the acquired corporation that is equal in value to at least 50 percent of the value of all of the stock of the acquired corporation outstanding immediately before the overall transaction. For purposes of this determination, liabilities assumed or liabilities to which the property transferred is subject, will be considered to be part of the total consideration received. See Rev. Rul. 80-284, 1980-2 C.B. 117, and section 3.02 of Rev. Proc. 77-37, 1977-2 C.B. 568, 569.

(b) That this section applies to a transfer by a corporation (acquired) of a substantial portion of its assets to another corporation (acquiring), in an exchange otherwise qualifying for treatment under this section, if the exchange is part of a larger transaction that fits a pattern common to acquisitive reorganizations, unless there is a continuing interest through stock ownership in the acquiring corporation on the part of the acquired corporation or shareholders of the acquired corporation that is equal in value to at least 50 percent of the value of all of the stock of the acquired corporation outstanding immediately before the overall transaction. For purposes of this determination, liabilities assumed or liabilities to which the property transferred is subject, will be considered to be part of the total consideration received. In addition, for purposes of this revenue procedure, an acquired corporation shall be deemed to have transferred a substantial portion of its assets if the transferred assets constitute 15 percent or more of its gross assets. See Rev. Rul. 80-285, 1980-2 C.B. 119, and section 3.02 of Rev. Proc. 77-37

Sec. 3. Effective Date

This revenue procedure will apply to all ruling requests on hand in the National Office on March 2, 1981, the date of publication of this revenue procedure in the Internal Revenue Bulletin, as well as to requests received thereafter.

Sec. 4. Effect on Other Revenue Procedures

Rev. Proc. 80-22 is amplified.